“Sovaldi was the topic du jour at the American Society of Health Economists' conference a few weeks ago in Los Angeles. But talking to people who think about drug prices for a living, I got a decidedly different take: Sovaldi, many of them argued to me, is exactly the type of drug we should reward with high prices.”

“’Would I rather be spending $600,000 for a liver transplant and living a restricted life afterwards, or would I rather pay $80,000 up front and guarantee I never have to go through that?’ says Dana Goldman, executive director of University of California's Schaeffer Center for Health Policy and Economics. ‘In that context, it doesn't look like such a bad deal.’”

“The idea of a Hepatitis C cure is a significant innovation over the treatments that exist now, which rely on interferon proteins. Those medical regimes only worked for about half of patients and, even when successful, took longer and had worse side effects.

“Most drugs we're familiar with are also different from Sovaldi in another way: they offer treatment rather than cure. Insulin, for example, will help diabetics manage their blood sugar levels without remedying the root issues. Sovaldi is a cure: in 97 percent of cases, it eliminates the Hepatitis C virus altogether. That could prevent the need for liver transplants in more severe cases, which can cost hundreds of thousands of dollars.

“The same things that make Sovaldi so important to patients — and groups advocating for access — are what make the drug expensive. Its a breakthrough treatment that's highly valuable.”

“’Pharmaceutical companies get criticized for lots of things like that,’ Craig Garthwaite, a health economist at Northwestern University's Kellogg School of Management, says. ‘This is an actual innovation, and that is something that they should get a reward for.’

“As an economist, Garthwaite worries about what would happen if the price of Sovaldi fell dramatically. The drug would likely become more available to patients — although that looks to be an event in progress already, with some of Gilead's competitors expected to release similar Hepatitis C treatments within the next week.

“The incentive for companies to create really blockabuster, breakthrough treatments would be smaller.”

“’It becomes a policy question, of what we're willing to trade for less innovation,’ he says. ‘We have to be very careful because the benefits to innovation are huge. And this is really the hardest question we have in health economics is this efficiency dilemma.’”

“’They're developing a product that's a cure that will essentially put their own treatments out of business,’ USC's Goldman says. ‘We'd love for pharmaceutical companies to come up with a treatment that cures diabetes rather than just treats it. I want to pay them enough so it's possible they'll start working on cures rather than treatments.’”